UPDATE: Vivendi 1Q Meets Company Expectations, Keeps Outlook

French entertainment and telecommunications company Vivendi SA (VIV.FR) said Thursday that its performance in the first quarter of 2010 was in line with expectations, and forecast a modest increase in profits for the full year.

Vivendi chief executive Jean-Bernard Levy told shareholders at the annual meeting here that Vivendi expects slight growth in adjusted earnings before interest and tax, its preferred profit measure, for 2010. Levy didn't disclose financial details for the first quarter.

This latest full-year outlook was more precise than the forecast for "further growth" this year that the company made in March.

Adjusted EBIT excludes certain charges relating to acquisitions and mergers.

In 2009, the Paris-based owner of Universal Music Group, the world's biggest music company, posted a 3.6% rise in adjusted EBIT.

Vivendi reports full first quarter results May 11.

Supervisory board chairman Jean-Rene Fourtou said Vivendi will continue to pay a "high dividend" that will exceed its peers; its payout for 2009 is EUR1.4 a share.

Vivendi also owns pay-TV operator Canal Plus Group and has majority stakes in telecom operators SFR and Maroc telecom (IAM.CL).

Many of investors' questions Thursday centered on a shareholder class action suit the company is fighting in the U.S., after a jury there in February found Vivendi liable for misstatements about its financial health in 2001 and 2002. Vivendi is appealing the verdict.

Fourtou said the suit could end up costing Vivendi EUR800 million in legal costs and expected damages, for which it has already set aside EUR550 million. He said the company has spent about EUR200 million in legal costs since 2002 and could spend a further EUR50 million.

The Paris court of appeals Wednesday rejected Vivendi's motion to exclude French shareholders from a class of plaintiffs in the class action suit, which if accepted would have lowered any eventual damages.

Fourtou Thursday conceded that then-chief executive Jean-Marie Messier and others had made grievous strategic and management mistakes but insisted that no laws were broken.

Meanwhile, current CEO Levy said that it is in Vivendi's strategic interest to buy the remaining 20% it doesn't already own of French broadcaster Canal Plus France, which is being put up for sale by French media group Lagardere SCA (MMB.FR), but only at the right price.

Analysts say the two groups are at odds over a valuation of the stake, which Lagardere wants to dispose of because it doesn't fit in with its core media business. It is exercising an option to sell the stock under a shareholder pact with Vivendi, which has right of first refusal over the shares.

Under the terms of that agreement, Lagardere can sell its take in an initial public offering to third parties if the two can't agree on a deal. But Levy stressed the partners have only just begun negotiating over the stock and have years to complete a deal at an acceptable price.

-By A.H. Mooradian, Dow Jones Newswires; 33 1 4017 1738; jethro.mullen@dowjones.com

(Jethro Mullen and Ruth Bender in Paris contributed to this report)

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